Simultaneous Release at www.thegeekknows.com
Hi everybody, this is my first post at fxinstructor.com and i am honored to be part of this wonderful community!
I wrote about my apparent belief that the big players in the forex markets may be taking profits off their longs in this currency pair and i will like to explore this belief deeper here.
Just to recap, this belief came to me after observing closely how often big dips are seen ( suggesting possible big trades ) , followed by a slow ascend ( suggesting small trades taken, possibly courtesy of retail traders attempting to join this rally party ).
Folks who have been reading my articles will know by now that i do not take unnecessary risks and is often on the safe side.
This observation if true is important.
What happens when all the big players cease to have interest in long EUR/USD positions?
Retail investors may push the price further up for sometime but we have to note that ( based on wikipedia ) retail investors make up of only 2% of the market volume in 2006.
This percentage may increase by now but is definitely insufficient to carry out any momentum.
Particularly against big players.
Presumably that all the big players have exited their long positions, leaving only retail investors to carry on the rally, momentum will hence dwindle down.
This may spark profit taking for the retail investors ( by now, the big players would have already exited their long positions ) and hence tip the rally to a bearish momentum.
Ill informed retail traders who enter long trades now, will be on their way to a loss.
Ignoring market psychology may not be wise.
Notice the circled areas in my daily EUR/USD chart.
These were bearish days and happened during Fridays.
Profit taking might be happening.
A similar pattern was observed with the S&P 500.
Apparent profit taking at the end of the week.
Currently, we are in an important area for the EUR/USD.
We are hovering around the previous high of 1.4719ish from Dec 18 2008 and above lies major resistance 1.4800.
Should bearish momentum develop, expect support around 1.4690ish, as seen over the last few days.
I will be monitoring my usual market clues for signs of breakdowns.
The markets never travel in a straight line.
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You can visit my blog for more EUR/USD and forex articles.